Learn more about taxable events that may be associated with your current investments
Did you know that taxable investments can generate taxable distributions—even if you don’t take money out of the account? Consider the examples below and consult your tax professional for more information regarding potential taxable events.
Taxable event1 | Potential tax consequence |
|---|---|
| Receive a capital gains distribution |
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| Receive a dividend or interest payment |
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Exchange shares within the same mutual fund family (An exchange includes both a sale and a purchase) |
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| Sell shares and reinvest money with a different mutual fund family |
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| Keep in mind, capital gains and dividends within a taxable investment may be taxed at a rate that is lower than tax rates on ordinary income. | |
Discover the tax-deferral power of annuities
With a tax-deferred investment—such as an annuity—all interest and/or earnings accumulate free of current taxes and are taxed as ordinary income when withdrawn.2 In contrast to other traditional investments, such as stocks, bonds, CDs and mutual funds (unless held within a retirement plan or account), with an annuity there are:
- No capital gains surprises at tax time
- No annual 1099 forms to collect (unless a withdrawal is taken)
- Plus you have the flexibility to transfer between investment portfolios and money managers within a variable annuity—or rebalance the investment—without triggering any current tax consequences
Take action for your financial future
As you prepare for your financial future, it may make sense to periodically review your retirement savings and investment strategies from a tax perspective.
- Identify tax-smart strategies with your financial and tax professionals. They can be good resources for evaluating your tax liabilities and potentially identifying ways of reducing your tax burden in the future.
- Review your completed tax forms with your financial and tax professionals—look for ways to reduce or defer taxes.
- Consider how tax-deferred savings or investment strategies, such as annuities, may help you reduce current taxes and avoid tax-time surprises.
Action is everything. Talk to your financial and tax professionals about tax-smart strategies for retirement today.
1 Assuming the investment is not held within a tax-deferred retirement account or an annuity.
2 Early withdrawals may be subject to withdrawal charges. Partial withdrawals may reduce benefits available under the contract, as well as the amount available upon a full surrender. Withdrawals of taxable amounts are subject to ordinary income tax and, if taken prior to age 59½, an additional 10% federal tax may apply.
Please seek the advice of an independent tax professional or attorney for more complete information concerning your particular circumstances and any tax statements made in this material.
Guarantees are backed by the claims paying ability of the issuing insurance company.
Annuities are long-term insurance products designed for retirement. An investment in a variable annuity involves investment risk, including possible loss of principal. A variable annuity contract, when redeemed, may be worth more or less than the total amount invested. Early withdrawals may be subject to withdrawal charges. Partial withdrawals reduce the contract value and may also reduce certain benefits under the contract, such as the death benefit and the amount available upon a full surrender. Withdrawals of taxable amounts are subject to ordinary income tax and, if taken prior to age 59½, an additional 10% federal tax may apply.
There are different types of annuities with varying benefits, features, and risks, including potential loss of principal. Speak with your financial professional for more information.
Retirement plans and accounts, such as an IRA, 401(k) or 403(b), etc., can be tax-deferred regardless of whether or not they are funded with an annuity. The purchase of an annuity within a retirement plan or account does not provide additional tax-deferred treatment of earnings. However, annuities do provide other features and benefits that may be important to you, including options for guaranteed lifetime income and a guaranteed death benefit for your beneficiary.
Generally, higher potential returns involve greater risk and short-term volatility. For example, small-cap, mid-cap, sector and emerging funds can experience significant price fluctuation due to business risks and adverse political developments.
Investing involves risk, including the possible loss of principal. Investment values will fluctuate and there is no assurance that the objective of any fund will be achieved. Mutual fund shares are redeemable at the then-current net asset value, which may be more or less than their original cost.
Investors should carefully assess the risks associated with an investment in the fund.
Variable annuities are sold by prospectus only. The prospectuses for each underlying fund as well as the variable annuity contract describe the investment objectives, risks, fees, charges, expenses, and other information for each, respectively. The statutory and summary prospectuses for each underlying fund and the variable annuity contract should be considered carefully before investing. Please contact your insurance and securities licensed financial professional or call 800-445-7862 to obtain any of those prospectuses, which should be read carefully before investing.